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For GameStop CFO Robert Lloyd, Complexity Is Part of the Game

An increasingly international play in the video game market has GameStop Corp. CFO Robert (Rob) Lloyd more focused on finding talent with a wider range of skillsets—from analytics to M&A to strategy. During Deloitte’s “CFO Vision” conference, he discussed how his finance team supports the nearly 30-year-old business, including forecasting, strategic initiatives and retail concepts. He also shared his views on the digital adoption of video gaming, which is challenging the organization’s business model and how the company maintains its buy-and-sell game trade operations.

Rob Lloyd: The old adage holds that the person who got you here may not be the person who can get you there. In the last decade, our talent needs have changed due to the company’s growing international focus and new acquisitions, with greater need for treasury and analytic capabilities. When we went from $400 million in revenue to a billion, we asked ourselves, “Do we have the right people to get us to $5 billion or $10 billion?”

We had to make some difficult decisions with respect to talent. And when the video game retail space began to consolidate, and digital and other factors began to shape it, we had to ask ourselves that question again, focusing on the broader talent picture within the organization and the executive team. We asked, “Where can we get people who can help us transform the business and do more M&A work outside of specialty retail video games?” That kind of thinking has trickled down to finance as the business has changed.

Q: Howdoes finance partner with the business?

Rob Lloyd: Forecasting is a main area where finance partners with the business. Our finance and merchandising teams work very closely to determine what they think the forecasts are going to be, and members of our finance business planning and analysis (BP&A) team are assigned to each of the functional businesses. Those partnerships help keep finance in the loop on what’s happening within the business, and provide that financial and analytic horsepower to the operators so that they know what they should be focusing on within their business. And we work with our strategy team, which looks at longer-term forecasts from analysts, data houses, research firms and the game publishers and takes approximately 20 other inputs to boil down our vision of the future into what we call a “market model.”

Our finance team also supports our acquisitions strategy. We’re heavily involved in modeling associated with potential opportunities and transactions, and we’ll work closely with a target we might be considering for a joint venture or acquisition and model the business. Of course, finance takes part in due diligence and negotiations. Those activities have been a heavy demand for finance talent throughout the last three years.

Our buy-sell trade model and how we can use that to roll out other retail concepts is another area where finance partners with business. The skillsets we’ve developed over nearly 20 years in the buy-sell trade model are very important. It requires a deep understanding of the supply and demand and the impact on pricing.

Q: What is your role in helping GameStop reset strategy?

Rob Lloyd: GameStop has a rich history of transforming our business to meet the expanding needs of our customers. In the past six or seven years, we’ve been focusing on continuing to grow our market share and leadership position in the global video game industry by maintaining our leadership position in the new and pre-owned hardware and software categories, and growing new businesses to be a major player within the digital and mobile gaming spaces. We also are focused on diversifying into other retail concepts, including our highly profitable AT&T wireless and Apple businesses, or what we call Technology Brands, and introducing other products that we can sell within our GameStop stores, like pop culture collectible items.

For each of these transformations, one of the primary roles I’ve played is focusing on our capital allocation. I believe CFOs must ensure the capital allocation programs are robust and focused on returning shareholder value, and have a forward-looking view of the strategy of the business. Deciding where to make technology investments, in particular, is another critical area where our finance team supports strategy, especially given the changing state of technology, and the role of mobile technology in delivering value to the customer.

As we’ve made acquisitions and opened new stores, we’re putting much more horsepower into analysis. The analytics around the acquisition, the synergies we could get out of it, and individual store performance have become very important. And with GameStop continuing to transform, we’ve brought in new talent into our strategy and BP&A teams as the company seeks candidates for diversification, acquisitions and product sets. We’ve also found it important to bring in other views on how things work at other companies and some new thinking around that.

Q: What trends or issues are you focused on, either from an industry or organizational perspective?

Rob Lloyd: Beyond cyber security compromises, which would hit the top of any retailer’s risk list, we’re looking at the impact of technology and digital to our business model. Digital is becoming a much greater piece of the puzzle for video games, and we’re watching digital adoption of video gaming closely to understand what that means for us. How can we participate in that marketplace and make our stores continue to be relevant to our customers? One of the ways that we’re addressing that question is to focus on what’s happening inside our stores. We sell about a billion dollars a year in digital content, which would be about 10% of our revenues, 90% or more of which goes through our store base because our customers still want assistance from a store associate on what they should be buying.

With video games being a cyclical business, we’ve recognized the need to diversify the company. Our Technology Brands segment is a great example of this. In just two short years, we’ve grown our AT&T Wireless and Apple businesses into the largest authorized resellers of AT&T wireless services and Apple products and services in the United States. We have expanded this business from about 145 stores to the point that there are more than 1,000 stores. So with that growth comes a whole new set of challenges and finance complexity.

Editor’s note: This article is part of an ongoing series of interviews with CEOs, CFOs and other executives. Mr.Lloyd’s participation in this article is solely for educational purposes based on his knowledge of the subject, and the views expressed by him are solely his own. This article should not be deemed or construed to be for the purpose of soliciting business for GameStop Corp., nor does Deloitte advocate or endorse the services or products provided by GameStop Corp.

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